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MegaLoMart Comparing Merchandising and Manufacturing Activities Merchandisers... Buy finished goods. Sell finished goods. Manufacturers... Buy raw materials.

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Presentation on theme: "MegaLoMart Comparing Merchandising and Manufacturing Activities Merchandisers... Buy finished goods. Sell finished goods. Manufacturers... Buy raw materials."— Presentation transcript:

1 MegaLoMart Comparing Merchandising and Manufacturing Activities Merchandisers... Buy finished goods. Sell finished goods. Manufacturers... Buy raw materials. Produce and sell finished goods. Next Page Click Here

2 The Product Direct Materials Direct Labor Manufacturing Overhead Manufacturing Costs Next Page Click Here

3 Direct Materials Those materials that become an integral part of the product and that can be conveniently traced directly to it. Example: A radio installed in an automobile Next Page Click Here

4 Direct Labor Those labor costs that can be easily traced to individual units of product. Example: Wages paid to automobile assembly workers Next Page Click Here

5 Manufacturing costs that cannot be traced directly to specific units produced. Manufacturing Overhead Examples: Indirect labor and indirect materials Wages paid to employees who are not directly involved in production. Examples: maintenance workers, janitors and security guards. Materials used to support the production process. Examples: lubricants and cleaning supplies used in the automobile assembly plant. Next Page Click Here

6 Merchandiser Current Assets: Cash Receivables Prepaid expenses Merchandise inventory Manufacturer Current Assets: v Cash v Receivables v Prepaid Expenses v Inventories Raw Materials Work in Process Finished Goods Balance Sheet Partially complete products – some material, labor, or overhead has been added. Completed products awaiting sale. Materials waiting to be processed. Next Page Click Here

7 The Income Statement Cost of goods sold for manufacturers differs only slightly from cost of goods sold for merchandisers. Next Page Click Here

8 Selling and Administrative Expenses Period Costs Manufacturing Cost Flows Finished Goods Cost of Goods Sold Selling and Administrative Manufacturing Overhead Work in Process Direct Labor Costs Income Statement Expenses Material PurchasesRaw Materials Balance Sheet Inventories Next Page Click Here

9 Product Costs – Raw Materials Beginning inventory is the inventory carried over from the prior period. Next Page Click Here

10 As items are removed from raw materials inventory and placed into the production process, they are called direct materials. Product Costs – Direct Materials Next Page Click Here

11 Conversion costs are costs incurred to convert the direct material into a finished product. Product Costs – Total Manufacturing Costs Next Page Click Here

12 Product Costs – Goods in Process All manufacturing costs incurred during the period are added to the beginning balance of work in process. Next Page Click Here

13 Product Costs – Cost of Goods Manufactured Costs associated with the goods that are completed during the period are transferred to finished goods inventory. Next Page Click Here

14 Product Costs – Cost of Goods Sold Next Page Click Here


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